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Introduction to Kazakhstani Passenger Car Market
Globis GmbH, July 2008, Pages: 66
This Globis report gives a comprehensive analysis of the Kazakhstani car market. With 15.5 million inhabitants, Kazakhstan is the fourth largest country in CIS, after Russia, Ukraine and Uzbekistan. Given the difficult political situation in Uzbekistan, Kazakhstan is actually the third most interesting country in CIS. Kazakhstan’s real GDP was growing with double-digits over the last years. Wages were also growing at a comparable pace and are now at 424 USD per month on average. With rising inflation, real growth will be more moderate in the future.
Kazakhstan’s car penetration is comparable with Russia and still much lower than in Western European markets. The growth in car park was mainly driven by imports of used cars, which peaked in 2006. The new car market is also growing continuously but growth rates of 40% p.a. over the last years can not be maintained in the future. We estimate a growth of about 19% p.a. until 2010.
The new car market is characterized through the large number of grey dealers. Whereas in 2006 more than 50% of new car sales of non-CIS brands were made through grey dealers, this share in reducing now. Russian brands still play a strong role in the market and grow with overall market development. The park is still dominated by VAZ.
Financing of cars is developing rapidly while market penetration is still low. Financing is especially important for Kazakhstan since consumers prefer large cars and SUVs which are more costly. The availability of personal information for loan procedures is improving, but only slowly. With rising inflation, however, the growth of car financing might be limited.
Kazakhstan currently is not a market for small cars. Most cars sold are from lower and upper medium class or SUV-class. The availability of smaller cars is also limited, for example Toyota is not selling its Yaris through its official dealerships. It is unclear, how consumers will react to a better offering of smaller, affordable cars. With energy prices up and inflation on the rise, smaller, less fuel consuming cars could be an opportunity in the market.
Kazakhstan has no own passenger car brand. Azia Avto, a company listed on the Kazakhstan Stock Exchange (KASE), currently is the only producer, assembling Ladas, Skodas and Chevrolets. Nissan is about to set up an assembling facility and several Korean and Chinese OEMs are investigating a potential entry. With plans of AvtoVAZ, the Russian car maker, to buy a stake of at least 25% in Azia Avto, the situation is getting more complicated. Since Renault took a stake of 25% plus one share in AvtoVAZ, and Renault and Nissan being part of the same group, the car manufacturing scene in Kazakhstan might look different.
Given this situation, there is a limited number of players in the automotive industry in Kazakhstan. Most of them export, mainly to Russia. The government wants to develop the automotive industry and is slowly progressing. Nissan’s plant and Nokian Tyres’ production joint venture are first steps. Kazakhstan’s advantages are, besides incentives provided by the government, its strategic location to Russia, the upcoming Eurasian Economic Community (EurAsEC) which will develop a customs union between Russia, Kazakhstan and Belarus at first and the low wages. In total, we expect a strong increase in local production activities although still on a low level compared to major automotive nations.
Along with the inflow of used cars, the aftermarket is growing by almost 10% p.a. over the next years to 2010. The aftermarket is one of the most attractive sectors of the Kazakhstani automotive industry over the next years. With further additions to the park and more demanding consumers, better and more frequent service and better parts are needed.
The distribution system for spare parts is only forming. Also, service chains have not yet developed and even Bosch car service, present in many emerging automotive markets, is just starting. In any case, distribution is a real challenge due to the size of the country. With a population density of 6, it is hard to reach nationwide penetration. A good starting point are the two major cities, Almaty and Astana, followed by the mining provinces, which have a larger car park and a wealthier population.
In total, the Kazakhstani market for passenger cars and the aftermarket provide attractive opportunities. Especially in the aftermarket, structures are just forming and there is great value to be generated by early entry.
To prepare this market report, Globis used primary and secondary research methods: expert interviews and consumer surveys – in particular for the market of automotive parts, which is not covered yet by any substantial statistical data – and standard analysis of secondary information available on the topic. Based on Globis' experience and developed competencies we have built proprietary market models to forecast future market development. The report was compiled in the period from October 2007 to June 2008 and hence includes statistical data until Q1, 2008, if available.
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